ASFMRA AgNews - Vol. 13 Issue IV [January 30, 2018]

By ASFMRA Press posted 01-30-2018 08:30

  

Why Isn't Land Cheaper?

Agriculture has suffered through four years of lower commodity prices and reduced profitability in the farm sector.
So why don’t land prices reflect this?

The short answer: It’s because farmers and investors keep buying land.

Farm operators continue to be the primary buyers at land auctions, says Brad Hayes, lead appraiser for Peoples Company, Clive,
Iowa. In addition, there are numerous investors and individuals with 1031 exchange funds who are active participants at land
auctions, he explains.

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SCOTUS: WOTUS Challenges Will be Heard in District Courts

In a unanimous decision issued on Monday, the U.S. Supreme Court ruled that challenges to the 2015 Clean Water Act Waters of
the United States rule should have been brought in district courts, not courts of appeals. This result was widely expected and
predicted, though most were expecting a 6-3 or 7-2 decision, not a unanimous decision. Read the ruling by clicking here…
This decision is likely to lead to considerable confusion in the coming days and weeks. It’s at least conceivable that the 2015
Rule could take effect in some states soon unless Environmental Protection Agency and the Army Corps of Engineers act, or a
district court enjoins the 2015 rule nationwide.

The EPA and Corps have not yet finalized a proposed repeal of the 2015 rule or their proposal to extend the application of the
2015 Rule by two years. It’s not clear if/when agencies will finalize either action, but the whole reason they proposed to
extend application of the 2015 rule was to avoid the very scenario we are now in.

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Farm Bill Reform Would End "Dishonest" Subsidies, says Midwestern Senator

On the same day that Agriculture Secretary Sonny Perdue released a 42-point list of farm bill principles, Iowa Senator Charles
Grassley said the 2018 bill should end the “dishonest” practice of crop subsidy payments to nonfarmers. Grassley prevailed in a
Senate vote for tighter subsidy rules while the 2014 farm law was under debate, but the reforms were nearly erased in the final
version of the law.

Grassley’s package would limit growers to $125,000 a year per person in payments and limit farms to one manager who also is
eligible for subsidies. At present, there is no effective limit on payments per person, and the eligibility rules are nearly
toothless. The Government Accountability Office said in 2013 that the USDA allowed payments to people who were identified as
managers but who never set foot on the farm or were simply relatives of the farm owner. In an essay in the Daily Caller,
Grassley said his reforms would save several hundred million dollars that could “provide assistance to those who truly need
help.”

The Iowa Republican, a member of the Senate Agriculture Committee, said, “Congress now has a chance to make up for that missed
opportunity and to do right by the agriculture community and American taxpayers as talks on a new farm bill begin.” The final
version of the 2014 bill deleted Grassley’s subsidy limits and instead told the USDA to look at tighter limits on nonfamily
farms. The move exempted 96% of farms from any reform.

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6 Farm Managment Questions You Should Answer Today

With budgeting and planning for 2018 under way, many producers are considering what might be in store for 2018 – and beyond. As
the saying goes, the best-laid plans often go awry. In many cases, unknown factors outside of farmers’ control – such as
weather or commodity prices – can significantly impact their bottom lines.

While you don’t know the future, you still must make plans and run your businesses in an uncertain world. This leaves you in a
bit of a quandary about how to make decisions and estimates for the future. There are a variety of approaches you can use, but
by focusing on the right questions, thinking critically about them, updating ideas as more information becomes available, and
thinking about what is causing changes to the forecasts, you can make better decisions.

Following are six key questions you should consider and evaluate critically. In considering these questions, the answers should
be made probabilistically. In other words, instead of answering yes or no, consider the probability of the event happening. For
example, you should consider your answers to these question like rain forecasts. Then make some notes about how you arrived at
these forecasts and make a point of revisiting your views frequently.

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USDA Notes Uptick in 2017 Farm Incomes

After three consecutive years of decline, net farm income is forecast by USDA to rise slightly in 2017. In its end-of-year
update, USDA forecasts net farm income will increase 2.7% to $63.2 billion in 2017. While not quite as positive as USDA’s 3.1%
rise forecast in August, it is still far better than USDA’s initial forecast for an 8.7% decline issued in February. Net cash
farm income (without any inventory adjustment) is forecast to increase 3.9% to $96.9 billion.

Despite the forecast upturn in income, however, 2017’s net farm income level would be below all other years from 2009 through
2015 and net cash farm income would be below all years from 2010 to 2015. Debt levels continue to rise, raising concerns about
working capital and debt repayment going into 2018.

Farm real estate debt in 2017 is expected to reach a historic, nominal high of $236.4 billion. The annual 4.6% rise in real
estate mortgage loans reflects continued expected demand for cropland combined with increasing use of real estate as collateral
to secure non-real estate borrowing and operating loans.

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Perdue Announces USDA’s Farm Bill and Legislative Principles for 2018

(Mifflintown, PA, January 24, 2018) – U.S. Secretary of Agriculture Sonny Perdue today announced the U.S. Department of
Agriculture’s Farm Bill and Legislative Principles for 2018 during a town hall at Reinford Farms in Mifflintown, Pennsylvania.
“Since my first day as the Secretary of Agriculture, I’ve traveled to 30 states, listening to the people of American agriculture about what is working and what is not. The conversations we had and the people we came across helped us craft USDA’s Farm Bill and Legislative Principles for 2018,” said Secretary Perdue. “These principles will be used as a road map –  they are our way of letting Congress know what we’ve heard from the hard-working men and women of American agriculture. While we understand it’s the legislature’s job to write the Farm Bill, USDA will be right there providing whatever counsel Congress
may request or require.”

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Ag Remains Strong U.S. Economic Sector, Analyst Says

The current economic strength could prove to be a short-term high for investors, while the biggest recipients will be wealthy
people and corporations, one market analyst tells Agriculture.com.

Ron Insana, a CNBC contributor and a scheduled speaker at this week’s Land Investment Expo in West Des Moines, Iowa, spoke with
Agriculture.com Wednesday.

While addressing everything from tax cuts, the stock market, the economy, and the realization that the U.S. farmer has faced
diminishing returns in recent years, Insana says the positive side is increasing global demand for U.S. ag products and cheaper
food.

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Minnesota Ag Land Prices, Rents Flat or Slight Down

The Minnesota Chapter of the American Farm Managers and Rural Appraisers this week released their 2017 member report of actual
cropland sales and rental transactions, with values holding steady, but not declining despite continued low commodity prices.

The survey includes data from Jan. 1, 2017, to Dec. 31, 2017, omitting "non-typical" transactions. In the state report, chapter
President Adam Schmidt, of Northfield, Minn., says land prices and cash rents generally "held steady" in 2017.

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Report: Nebraska Ag Land Valuations Down in 2017 After Decade of Double-Digit Increases

LINCOLN — Farm and ranchland valuations dropped last year after a decade of double-digit increases, according to a new state
report.

The Nebraska Department of Revenue report, issued Friday, shows that agricultural land valuations fell to $99.27 billion in
2017, down 0.18 percent from $99.45 billion the year before.

But the report shows that the total amount of property taxes levied in Nebraska grew by 3.84 percent in 2017.

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Terva Releases Q4 2017 Iowa Farmland Auction Report

With 201 public auctions and an average sale price of $7,713, the end of 2017 saw a lot of agricultural sales activity in the
state of Iowa.

“Land auctions exceeded 200 sales in the last quarter of 2017 compared with merely 120 in the third quarter, with especially
more land that is not necessarily higher quality tillable farmland. This bump in farmland supply has resulted in a minor dip in
the land prices over the past few months especially for lower quality land. However, the prices for higher quality tillable
grounds are fairly stable and represent a modest increase over average sale price of $8,625 in the fourth quarter of 2016,”
says Dr. Wendon Zhang, assistant professor of economics and Extension farm management specialist at Iowa State University.

Click on the link to download a pdf of Terva's Farmland Auction Report, which provides an in-depth review of Iowa farmland
auction results from the fourth quarter of 2017 as well as commentary from Zhang.

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Appraisal Standards Board Q&A


The Appraisal Standards Board has issued new Q&As for January 2018:

• Can I Perform an Appraisal if the Property Inspection was done by Someone Else?
• Does USPAP Require Disclosure of Assistance by a Non-Appraiser?
• Employing an Extraordinary Assumption When an Inspection was Performed by Another

To view all ASB Q&As, please visit the Standards & Qualifications Q&A Page.
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